Apologies for absence were received from Councillor Martins.

There were no disclosures of interest.

The minutes of the meeting held on 2nd December 2010 were agreed and signed.

The Head of Strategic Finance gave a presentation on factors relevant to setting a budget. He covered various aspects which included balancing the budget with regard to expenditure and available funding; he affirmed that it was essential that the budget should be realistic in terms of the current economic climate.

The Panel received a report of the Head of Strategic Finance who then explained relevant points within the report.

Central Government Draft Revenue Support (Formula) Grant Settlement
The Head of Strategic Finance advised that the Revenue Support Grant (RSG) settlement had been worse than anticipated due to a severe reduction in funding. This would prove particularly difficult for this authority. He explained that the system of distributing RSG had changed and that Watford would be penalised through having a historically high level of Council Tax.

Medium Term Financial Strategy
The Head of Strategic Finance explained that funding from central Government would be circa £1.2 million lower than expected due to the grant settlement penalising those with higher revenue through Council Tax. He stressed that the assumption that there would be no increase in council tax in future years would be highly unlikely and drew the meeting's attention to Appendices 3A and 3B which demonstrated that the level of savings required would not be achievable without increases in this tax. The Head of Strategic Finance added that, in reality, further additional savings would need to be identified.

One Member reminded the meeting that the Mayor's pledge had been to keep Council Tax increases below the level of inflation.

The Portfolio Holder advised that part of the reserves had been ear-marked for pensions and that this could not be spent. He added that Watford's economy depended in large part on commercial rent and that a good level of reserves was necessary in order to provide for opportunities which could arise in the future. He affirmed that maintaining a low level of Council Tax increase continued to be a long term objective.

Service Prioritisation Process
The Head of Strategic Finance said that, at its meeting on 13th December 2010, Cabinet had endorsed Budget Panel's proposals that no increase in fees for parking permits be introduced. Service Prioritisation Proposals were itemised in Appendix 4 of the report and they would be considered by Cabinet at its next meeting on 17th January 2011.

Fees and Charges
The Head of Strategic Finance noted that income from fees and charges was likely to decrease. A summary of the effects of this decrease was detailed in Appendix 5 of the report.

Draft Detailed Revenue Estimates 2011 / 2015
The Head of Strategic Finance drew the meeting's attention to appendices 6A and 6B of the report and noted that figures for these tables had only been available on the day of the meeting. He noted that, whilst the variance of £6,300 would not be achieved, the final figures would not be too dissimilar. He advised that the figures would be analysed and then presented to Cabinet.

Use of and Replacement of Reserves
The Panel discussed the issue of reserves available to the authority.

The Head of Strategic Finance noted that Watford Borough Council's reserves were above the basic level and reported that a residual balance of £2,241,000 was available to support future years' budgets. He advised, however, that strategies should be employed to replace the reserves.

The Executive Director explained that over the previous six years the Shared Services initiative had made considerable savings. She advised that, due to the scale of reductions achieved, it would be wise to consider further opportunities for providing services jointly with other authorities; she suggested that suitable services included could be Audit or some front line services. She concluded by advising that the Council should remain aware of what changes other authorities were implementing.

The Portfolio Holder advised that other local authorities were considering putting a Shared Services scheme into operation. He suggested that Watford could provide the model to market the Shared Service scheme to other authorities. The Member added that another suggested saving had been the reduction of three councillors to two for each ward. He advised that this would be a longer term solution as a referendum decision would be required.

The meeting discussed the option of outsourcing services.

The Portfolio Holder advised that the introduction of ‘Universal Benefit' would result in considerable changes to the service. He suggested that the Revenues and Benefits Service could be outsourced and added that it was hoped to reduce the number of costly agency staff currently working in the service. He stressed that the twin issues of cost effectiveness and delivery needed balance.

One Member agreed that outsourcing services could lead to benefits in terms of the budget. He advised that levels of sickness in local government staff were relatively high and noted that the introduction of the leisure enterprise, SLM, had been very successful.

The Head of Strategic Finance expressed his concern with regard to the transfer of funding for concessionary fares to the County Council and drew the meeting's attention to the need to keep an adequate level of Working Balances but that £375,000 should be available for efficiency savings in 2013 / 2014 onwards.

Recommending the Council Tax for 2011 / 2012
The Head of Strategic Finance advised that it was the intention of all neighbouring authorities to ‘freeze' Council Tax. He explained that authorities would need to freeze or lose the Revenue Support Grant.

Future Strategy to Meet Reductions in Government Funding
The Panel discussed ways of meeting reductions in funding.

The Chair noted points 12.1 and 12.2 in the report and suggested other methods for increasing available funding. These included outsourcing, Shared Services and increasing fees and charges. He also suggested that contributions to voluntary services could be decreased; he advised that these services should be asked to ensure they were efficiently organised in order that demands on Council funding would not be not so great. One Member suggested that grants to these organisations were due to be cut by 25% under Service Prioritisation.

Outsourcing:
Members considered that outsourcing services should be a priority option.
Shared Services:
Members agreed that the principle of sharing services jointly with other authorities was a wise option.
Use of Reserves:
The Panel considered that use of the reserves should be limited and used only as a ‘last resort'. The Executive Director advised that Shared Services had contributed to the reserves through savings that had been made.
Council Tax Increases:
Councillors considered that it would be wise to keep Council Tax at a low and acceptable level of increase.
The Voluntary Sector:
One Member pointed out that voluntary organisations served the most vulnerable section of the community and that to withdraw support would be unwise. The Portfolio Holder advised that support of the voluntary sector was one of the Council's key objectives.

Capital Programme 2010 / 2015
The Head of Strategic Finance drew attention to appendix 9 of the report. He noted that available funding after completion of the capital programme would be reduced to £1.8 m and that it was imperative that the Council examined ways to generate more capital receipts. He advised that once the capital receipts had been spent this would also result in a loss of investment interest.

The Portfolio Holder reminded the Panel that it was important to retain reserves in case of emergency need.

Key Risks
The Head of Strategic Finance then advised the Panel on the key risks as identified in Appendix 8.

He said that pay and price inflation were containable. He advised that commercial rents were vulnerable in the short term but that revenue from rents in Charter Place and the Health Campus would hopefully be forthcoming once development had been completed.

The Portfolio Holder advised that the risks were substantial as the Council relied on income from commercial rents.